Observation 1 – the electricity industryNuclear power is on the verge of a substantial revival but limits on the amount of federal loan guarantees block investment in new constructionBhambhani, 08

(Dipka, Inside Energy with Federal Lands, 6/9, “Limits on loan guarantee program seen blunting its impacton nuclear revival,” lexis) //DHRepresentatives of the Energy Department, Wall Street and industry told senators last week that DOE's $18.5 billion in loanguarantees for new nuclear plants is not enough to substantially promote a revival of nuclear power in the US.In a roundtable discussion, four senators were reminded that nuclear plants are capital-intensive and require utilities tospend tens of millions of dollars to prepare to build the units.

"These new nuclear plants are very high-cost ? capital-intensive plants that can't be financed on individual companies' balance sheets," said Nuclear Energy Institute President Frank "Skip" Bowman. "I don't think Congress has done everything in all respects to help promote this obvious need for newnuclear plants."Bowman said the cost of electricity is increasing and the nuclear plants would help lower those expenses.Wall Street analysts told the lawmakers that

investors are uncomfortable financing such long-term projects that are subject to thewhims of politics and regulatory change.

Among the issues for investors is DOE's loan-guarantee program. The program, a provision of the Energy Policy Act of 2005 calls for the department tocover up to 100% of a loan for a clean energy project, up to 80% of the cost of the entire project if the loan comes from the Federal Financing Bank at theTreasury Department. DOE would cover up to 90% of the total cost of a loan that comes from another lending institution.Under the program, DOE would act as a sort of cosigner to the financing.In April, DOE announced that it plans to conduct solicitations this summer for advanced energy projects that may qualify for up to $38.5 billion in federalloan guarantees (IE, 14 April, 14). $18.5 billion of that amount is earmarked for nuclear plants, with another $2 billion for uranium-enrichment facilities.

In an interview after the roundtable, DOE Assistant Secretary for Nuclear Energy Dennis Spurgeon agreed that the $18.5 billion would barely cover the construction of three nuclear plants.Spurgeon said, "for us to be able to put the amount of nuclear energy into use that we believe is required in order for us tomeet both energy needs and reduce our carbon emissions, requires many more nuclear plants than can be supported by thecurrent cap on loan guarantees."The Congress must appropriate more money or eliminate the cap on the guarantees, the assistant secretary said. "Thesubsidy cost is paid by the applicants. Just like with the Export-Import Bank, this is not something that, run properly, wouldcost the taxpayer a dime," Spurgeon said.